Australian Politics Forum - Negative Income Tax: would you support it?

Auggie Gold Member Offline The Bull Moose Posts: 8571	Re: Negative Income Tax: would you support it? Reply #15 - Apr 19^th, 2017 at 8:11pm freediver wrote on Apr 19^th, 2017 at 8:09pm: Why? Are you suggesting a flat negative rate? I'm not sure if you understood the OP. The flat rate would be 20% of any income over $40k. The first $40k would tax-free. 20% would be the Negative Income Tax rate.
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Re: Negative Income Tax: would you support it?
Reply #16 - Apr 19^th, 2017 at 8:58pm

Auggie wrote on Apr 19^th, 2017 at 6:06pm:

Milton Friedman pioneered the concept of the Negative Income Tax. For those who don't what it is, this is it:

First, let's assume that we implement a tax-free threshold of $40k, and a flat tax rate of 20%. Anyone who earns over $40k will pay 20% for each dollar over $40k. However, if you earn under $40k, say, $10k, then the taxpayer is entitled to a 'negative tax' (i.e. a payment from the government) according to the following principal: $10k - $40k = -$30k. 20% of $-30k is -$6000. This means that you would receive a payment of $6000 + $10k (your earnings) in a financial year. Basically, any amount earned below $40k would be subtracted by $40k and then the tax rate would be applied to that difference, resulting in a net payment to the taxpayer.

If a person earns nothing (i.e. $0) then he/she would be entitled to receive $8000 (20% of $40k).

The Negative Income Tax would replace most if not all welfare payments. Every person would have to file a tax return. Persons entitled to a negative tax would receive their payment periodically (in like manner as the government withholds tax every week/fortnight); this would provide a continual stream of payments.

The minimum amount $8000 is less than the full amount of Newstart Allowance of approx. $12k per annum.

OK. My concept is similar to yours, except it is not a flat rate. A single straight line, passing through 0% tax at $40k. Positive and increasing (marginal rate) above that, negative and decreasing below. Overall it would be similar to the current system, so not much change in people's take-home pay.

Your concept would disproportionately benefit people at either end of the spectrum - the very rich and the very poor.

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Dnarever Gold Member Offline Australian Politics Posts: 57172 Here Gender:	Re: Negative Income Tax: would you support it? Reply #17 - Apr 19^th, 2017 at 9:21pm Looks like a typical Liberal party policy take money off of the poor and gives it to the wealthy.
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Re: Negative Income Tax: would you support it?
Reply #18 - Apr 19^th, 2017 at 9:33pm

Dnarever wrote on Apr 19^th, 2017 at 9:21pm:

Looks like a typical Liberal party policy take money off of the poor and gives it to the wealthy.

Ah, no. The Liberal Party don't support any such policy. Both major parties support the unfair progressive taxation scheme.

And the policy also benefits the poor given that THE POOR DON'T PAY ANY TAX.

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freediver Gold Member Offline www.ozpolitic.com Posts: 47460 At my desk.	Re: Negative Income Tax: would you support it? Reply #19 - Apr 19^th, 2017 at 9:37pm It sounds to me like you are combining two different things at once - a change to the 'progressiveness' of the tax system and a change to how it is implemented. Good way to confuse people and make them hostile to your change for one reason or another.
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Re: Negative Income Tax: would you support it?
Reply #20 - Apr 19^th, 2017 at 9:41pm

Auggie wrote on Apr 19^th, 2017 at 9:33pm:

Dnarever wrote on Apr 19^th, 2017 at 9:21pm:

Looks like a typical Liberal party policy take money off of the poor and gives it to the wealthy.

Ah, no. The Liberal Party don't support any such policy. Both major parties support the unfair progressive taxation scheme.

And the policy also benefits the poor given that THE POOR DON'T PAY ANY TAX.

There are plenty of people living marginal existences on low wages paying tax.

The Liberals are running several policies to take money out of education and health etc in order to provide business with a tax cut, they do this all the time.

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Re: Negative Income Tax: would you support it?
Reply #21 - Apr 19^th, 2017 at 9:42pm

Auggie wrote on Apr 19^th, 2017 at 9:33pm:

Dnarever wrote on Apr 19^th, 2017 at 9:21pm:

Looks like a typical Liberal party policy take money off of the poor and gives it to the wealthy.

Ah, no. The Liberal Party don't support any such policy. Both major parties support the unfair progressive taxation scheme.

And the policy also benefits the poor given that THE POOR DON'T PAY ANY TAX.

I would think that the rubbish unfair progressive taxation scheme is more fair than what you are suggesting.

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Re: Negative Income Tax: would you support it?
Reply #22 - Apr 20^th, 2017 at 2:25pm

freediver wrote on Apr 19^th, 2017 at 9:37pm:

It sounds to me like you are combining two different things at once - a change to the 'progressiveness' of the tax system and a change to how it is implemented.

Good way to confuse people and make them hostile to your change for one reason or another.

The question is: "is it a good policy?" Based on my current understanding of it, I believe it is.

I think you'll find that many people would support a flat tax. The progressive tax system is completely unfair; it punishes people for earning more money.

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Re: Negative Income Tax: would you support it?
Reply #23 - Apr 20^th, 2017 at 2:26pm

Dnarever wrote on Apr 19^th, 2017 at 9:41pm:

Auggie wrote on Apr 19^th, 2017 at 9:33pm:

Dnarever wrote on Apr 19^th, 2017 at 9:21pm:

Looks like a typical Liberal party policy take money off of the poor and gives it to the wealthy.

Ah, no. The Liberal Party don't support any such policy. Both major parties support the unfair progressive taxation scheme.

And the policy also benefits the poor given that THE POOR DON'T PAY ANY TAX.

There are plenty of people living marginal existences on low wages paying tax.

The Liberals are running several policies to take money out of education and health etc in order to provide business with a tax cut, they do this all the time.

Yes, under my policy any person earning $40k or under wouldn't pay any tax, which is better than the current scheme now. $40k is low middle-class and would benefit a lot of people.

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Re: Negative Income Tax: would you support it?
Reply #24 - Apr 20^th, 2017 at 2:29pm

Dnarever wrote on Apr 19^th, 2017 at 9:42pm:

Auggie wrote on Apr 19^th, 2017 at 9:33pm:

Dnarever wrote on Apr 19^th, 2017 at 9:21pm:

Looks like a typical Liberal party policy take money off of the poor and gives it to the wealthy.

Ah, no. The Liberal Party don't support any such policy. Both major parties support the unfair progressive taxation scheme.

And the policy also benefits the poor given that THE POOR DON'T PAY ANY TAX.

I would think that the rubbish unfair progressive taxation scheme is more fair than what you are suggesting.

How so? Many middle class people pay around 33c on the dollar in taxes - a third of their income. The progressive tax system punishes the middle class more than it does the rich.

A flat tax would benefit the low, middle and upper classes. Think of it this way: if everyone pays the same rate of tax, then that means that if the Government wants to increase revenue it can ask the people to increase the tax rate so that everyone pays more tax, not just some people at the expense of others.

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Grappler Truth Teller Feller

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Re: Negative Income Tax: would you support it?
Reply #25 - Apr 20^th, 2017 at 2:47pm

The flaw is in 'declared income'... many who actually enjoy more than that $40k will find every bolt-hole to reduce their declared income below that so as to suck (again) of the largesse of the government. Without stringent tests on what is and what isn't income + fringe benefits, this could never work.

The government would be paying Kerry Packer to enjoy the billionaire lifestyle.

Negative gearing is already Negative Income Tax in the sense that it reduces tax liability of personal income tax.

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Re: Negative Income Tax: would you support it?
Reply #26 - Apr 20^th, 2017 at 5:19pm

Grappler Truth Teller Feller wrote on Apr 20^th, 2017 at 2:47pm:

The flaw is in 'declared income'... many who actually enjoy more than that $40k will find every bolt-hole to reduce their declared income below that so as to suck (again) of the largesse of the government. Without stringent tests on what is and what isn't income + fringe benefits, this could never work.

The government would be paying Kerry Packer to enjoy the billionaire lifestyle.

Negative gearing is already Negative Income Tax in the sense that it reduces tax liability of personal income tax.

Of course, the Government would have to determine what income is, such as fringe benefits, etc. I was just illustrating a simple example; it wasn't the totality of the policy.

I would also be open to supporting a 20% tax on all dividends from company profits irrespective of how much it was. This would prevent rich people from using this method to circumvent paying taxes by paying dividends below $40k.

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Re: Negative Income Tax: would you support it?
Reply #27 - Apr 20^th, 2017 at 5:50pm

Auggie wrote on Apr 20^th, 2017 at 2:25pm:

freediver wrote on Apr 19^th, 2017 at 9:37pm:

It sounds to me like you are combining two different things at once - a change to the 'progressiveness' of the tax system and a change to how it is implemented.

Good way to confuse people and make them hostile to your change for one reason or another.

The question is: "is it a good policy?" Based on my current understanding of it, I believe it is.

I think you'll find that many people would support a flat tax. The progressive tax system is completely unfair; it punishes people for earning more money.

Tax has never been about fairness or punishment. There is no fair way to take people's money off them. People only resort to the fairness argument when they have nothing else to stand on.

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Unforgiven Gold Member Offline I have sinned Posts: 8879 Gender:	Re: Negative Income Tax: would you support it? Reply #28 - Apr 20^th, 2017 at 5:51pm It already exists. Its called welfare.
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Re: Negative Income Tax: would you support it?
Reply #29 - Apr 20^th, 2017 at 5:59pm

Auggie wrote on Apr 20^th, 2017 at 5:19pm:

Grappler Truth Teller Feller wrote on Apr 20^th, 2017 at 2:47pm:

The flaw is in 'declared income'... many who actually enjoy more than that $40k will find every bolt-hole to reduce their declared income below that so as to suck (again) of the largesse of the government. Without stringent tests on what is and what isn't income + fringe benefits, this could never work.

The government would be paying Kerry Packer to enjoy the billionaire lifestyle.

Negative gearing is already Negative Income Tax in the sense that it reduces tax liability of personal income tax.

Of course, the Government would have to determine what income is, such as fringe benefits, etc. I was just illustrating a simple example; it wasn't the totality of the policy.

I would also be open to supporting a 20% tax on all dividends from company profits irrespective of how much it was. This would prevent rich people from using this method to circumvent paying taxes by paying dividends below $40k.

Interesting points. They're excellent as starting points for discussion of change in the current tax system.

BTW - I note the ATO is looking for workers - starting salary is $81k... not bad for a bottom entry level. I guess I could get by on $3600 a fortnight before tax.... bet employment has a 'preference will be given' clause.

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